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Published On: Wed, Mar 6th, 2013

Bear Straddle

A Bear Straddle is a derivatives option trading strategy that is considered speculative.

A Bear Straddle Option position occurs when the options trader buys a Bear or short in both a Put and a Call of the same underlying and at the same expiration date and strike price.  The options trader will earn a profit based upon the total of the premiums that the trader will collect from the trades.  A Bear Straddle is especially useful and usually entered into when the trader is expecting the underlying to lose value – hence the term Bear Straddle, or Bear Market Straddle.  Earnings on a Bear Straddle are limited to the premiums collected, but the risk factor is great, as the potential for losses is very large compared to potential for gains.  Therefore Bear Straddles are infrequent trading strategies.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

 

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